Moody’s: Azerbaijani authorities are encouraging the expansion of various non-oil sectors

The Azerbaijani authorities are encouraging the expansion of various non-oil sectors. A number of "strategic
road maps” were signed into
decree by the President in December 2016, which identified key focus areas for diversification including agriculture, consumer goods, financial services, heavy industry and machinery, tourism, and transport and logistics, Moody’s said in its report.

‘Progress on tourism and transport and logistics appear to be most advanced. On the tourism front, Azerbaijan's nine climates provide a variety of natural assets – businesses seek to attract winter tourism in the north of
country and sea-based tourism by the Caspian Sea. The authorities also promote the country as a sports and recreation hub and Baku, the capital, has already hosted a number of high profile events, including the inaugural European Games in 2015 and the 2017 Islamic Solidarity Games, and became a fixture on the Formula One circuit last year’, the agency said.

According to the agency, tourist arrivals grew 22% year-on-year in 2016, while the World Travel and Tourism Council estimates that tourism directly contributed 4% of 2016 GDP and employment: ‘Azerbaijan has the physical infrastructure – with a modern airport in Baku and four other international airports, the presence of leading global hotel chains, and improving transport links (more below) – to handle a further, significant increase in visitor arrivals. Azerbaijan also seeks to become a key transport and logistics hub, ultimately connecting China (A1 stable) and Central Asia with Europe (the so-called East-West corridor) and Russia (Ba1 positive) with Iran (unrated) and South Asia (the so-called North-South corridor)’.

‘Baku International Sea Trade Port is already the largest port on the Caspian Sea, and the first phase of relocation/expansion to the new Port of Baku in Alat is projected to be complete by mid-2018. The new port will be situated in a free trade zone that covers Baku's main international airport and railway nodes connecting Baku to Russia, Georgia (Ba2 stable) and Turkey (the recently completed Baku-Tbilisi-Kars railway), and Iran. The multimodal hub is expected to shorten transit times: for example, it currently takes 45 days to move items from the Iranian port of Bandar Abbas to Russia through existing sea routes, whereas a rail transit corridor through Azerbaijan would shorten the journey to 14 days. That said, the Azerbaijani authorities' diversification plans will come at a steep fiscal cost. Tax and custom incentives are part of the package to promote the development of non-oil sectors, and investment in infrastructure to build the transport and logistics hub alone is projected to cost some 5% of 2017 GDP’, the agency added
. .